Key Charities Act 2022 changes for governance professionals

There are new powers for unincorporated charities (those that are not a legal entity in their own right, such as charitable trusts and unincorporated associations) to make changes to their governing documents. Given that over two thirds of charities registered with the Charity Commission are unincorporated, this will likely affect many of the charities represented in this group. 

The intention is to simplify things and allow greater flexibility for charities to change their governing documents. The new Act does this by:

a) Consolidating three different powers into one. Previously, three powers were available: one for when a charity wanted to transfer its property to another charity; one for changes to its charitable purposes; and one for the amendment of its administrative provisions. Now, there is one power for all of these.

b) Making this new power available to all unincorporated charities. Previously, some of the powers were only available to smaller charities, and larger charities had to involve the Charity Commission. That would take time and money; the new power should eliminate some of that burden.

c) Introducing greater consistency. Some changes to governing documents will of course still require Charity Commission consent, e.g. changing charitable purposes. The new Act sets a consistent criteria for what the Charity Commission must consider when deciding whether or not to agree to a charity changing its purposes. This should mean that charities get a more consistent response from the Commission, regardless of whether they are incorporated or unincorporated.   

See the Charity Commission’s updated guidance on making changes to governing documents.

This will be relevant if your charity ever contemplates disposing of its land or property. Disposals include selling, leasing and letting.  There are strict rules around the disposal of charity land, and charities dispose of land for a number of reasons: to make money, to further their charitable purposes, or a mixture of the two. 

This change makes clear the rules which apply when one charity disposes of its land to another solely to further its charitable purposes. See the Commission’s updated guidance.

Charities frequently merge with each other. Previously, a loop hole in the law meant that there was a risk that charities would lose gifts and legacies after the merger. Some solved the problem by keeping “shell” charities to catch any gifts and legacies made post-merger. This was expensive, time-consuming, and somewhat undermined the point of merging. The new Act closes the loop hole, which should reduce if not remove the need to retain “shell” charities on merger. We really welcome this.

An ex-gratia payment is one that a charity feels morally obliged to make, even though it is not legally obliged to. This most frequently comes up for charities which receive legacies, but it could also include a payment to an employee where there is no contractual obligation to make one. The new Act gives charities the power to make small ex-gratia payments without requiring authorisation from the Commission. “Small” depends on your charity’s annual income, but this should hopefully reduce the admin for those of you with legacy team colleagues where there is a strong case to make a payment out of the estate for moral reasons. Note that this change hasn’t been made yet, but is expected to come into effect sometime during 2024.

In an interesting example of charity law reflecting wider social debates about returning assets, the Department for Digital, Culture, Media and Sport has decided to exclude some national museums and galleries from using this power. Also, any ex-gratia payments made where the recipient is located outside the UK will also (continue to) require the Commission’s approval.